Department of Interior Announces Ambitious New Offshore Oil Plan

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Secretary of the Interior Ryan Zinke on January 4th announced an ambitious oil and gas leasing plan for the federal Outer Continental Shelf (OCS) for 2019 to 2024. The Draft Proposed Plan (DPP) partially replaces the Obama administration’s plan for 2017-22.

...proposes to make over 90 percent of the total OCS acreage and more than 98 percent of undiscovered, technically recoverable oil and gas resources in federal offshore areas available to consider for future exploration and development. By comparison, the current program puts 94 percent of the OCS off limits. In addition, the program proposes the largest number of lease sales in U.S. history.

Interior proposes to open 25 of the 26 planning areas and to conduct 47 lease auctions in the five-year period. The DPP, however, is just the first step in a process that will take several years to determine which areas will actually be opened and which lease sales will be held. The process begins with publication of a notice of intent to prepare a draft Environmental Impact Statement. The DPP and the EIS will be open for public comments beginning January 8th, and public meetings will be held around the country beginning January 16th. More information is available here.

Opposition to the plan came immediately from governors from ten coastal states. Florida Governor Rick Scott, a Republican, announced that he would fight to have areas off Florida’s coast removed from the plan. Maine Governor Paul LePage, also a Republican, is the only Atlantic or Pacific state governor in favor of oil production off his state’s coast.

Offshore oil production would be more popular in these states if the federal government shared royalties with them. Oil and gas royalties from production on federal lands have been shared with states under the Mineral Leasing Act of 1920. Royalties from new production in the Gulf of Mexico have been shared with Louisiana, Texas, Mississippi, and Alabama for the past decade. Congress could pass legislation to extend royalty sharing to all coastal states. It seems to me likely that the prospect of tens of billions of dollars of new revenue would eventually change the minds of California’s elected officials.

Environmental pressure groups will also oppose the plan and file multiple law suits. They have already raised the argument that leasing new areas for offshore drilling will never happen because of low oil and gas prices. If that is true, then opponents should be able to relax now. But the Trump administration is planning for the possibility that prices won’t remain low forever.

Curiously, the reverse argument was made two decades ago. When President Bill Clinton vetoed legislation to open a small portion of the coastal plain of the Arctic National Wildlife Refuge (ANWR) to oil exploration in 1995, one environmental group argued that opening ANWR wouldn’t do anything to lower gasoline prices, which were then high, because it would take ten years for the oil to start flowing. My view is that we should expect our elected officials to think more than a few months ahead. That is what the Congress did last month when it included opening ANWR in the tax cuts bill, thereby concluding a forty-year debate, and this is what Secretary Zinke is doing with the new offshore plan.

The geopolitical impacts of the plan were noted by Katharine MacGregor, principal deputy assistant secretary for land and minerals management: “This plan is an early signal to the global marketplace that the United States intends to remain a global leader in responsible offshore energy development and produce affordable American energy for many decades to come.” The shale oil and gas revolution has already changed the global energy balance of power in favor of the United States. The mere possibility of similarly vast increases in American offshore production will tip it even further.